Full steam ahead for hot beverages

As well as proving just how important local c-stores are to their communities when supermarkets are out of reach, January's big freeze also reminded consumers how comforting a cup of something hot can be when the temperature is plummeting. And although the snow has long since melted, the British public's love affair with hot beverages looks in no danger of disappearing.

According to IRI, the total hot beverage market is up 4.3% year on year, with an impressive 98% of households regularly buying some kind of hot drink. In fact, it's estimated that 1,400 cups of hot drink are consumed in the UK every second. With that kind of market penetration in mind, stocking up on tea, coffee and hot chocolate looks like a must for c-store consumers who want to benefit from the popularity of hot beverages.

Full of beans

Ten years ago you'd often hear American tourists berating the fact that they couldn't get a decent cup of coffee from a nation that seemed so addicted to tea. But times have changed. The huge growth of big-name chains such as Starbucks and Café Nero means that you can now grab a cafe latte to go in even the smallest towns.

Whether it's a cappuccino on the way to work or an instant coffee at the office, we're certainly drinking our fair share of the dark stuff. According to IRI, coffee has a 47% share of hot beverages while the coffee market is valued at £764m in the UK. Mintel points out that while the coffee chains may have suffered due to the recession, they have had a big part to play in educating consumers about coffee.

Nestlé UK trade communications manager Graham Walker agrees. "These days consumers understand so much more about the coffee they're drinking," he says.

"It's similar to what has happened with wine in this country. Ten years ago we weren't very knowledgeable about wine now people are more educated about different grapes and the way that wine is made. Today something similar is happening with coffee."

During the downturn coffee lovers have reportedly been cutting back on pricey to-go coffee (although Starbucks' profits are apparently back on the rise). In part, they've been saving money by attempting to replicate the 'real coffee' taste at home. Because of this sea-change, Walker reports that premium and super-premium brands within the Nestlé portfolio are performing well. Sales of Gold Blend and Alta Rica have risen by 14% and 9% respectively.

The roast and ground coffee market has also been given a boost by the trend for premium tastes. Although one in five consumers interviewed by Mintel say that ground coffee is too much effort to make at home, according to IRI the roast and ground coffee sector has risen 6.4% by volume and 12.6% by value.

To tune into this mood, Rombouts' one-cup filters have recently been relaunched with new packaging to try and convince consumers that making filter coffee needn't be a hassle. The packs have been designed with the emphasis on provenance and are available in Costa Rican, Colombian, Decaffeinated and Italian Style varieties. With the relaunch, Rombouts is looking to grow its 35% value share of the one-cup filter sector.

Lyons is also looking to capitalise on the premium market by introducing a new level of convenience for cafetiere users. Its new range of convenience sachets have been created with exactly the right amount of coffee for a four-cup cafetière, so consumers don't end up with a pot of coffee that's too weak or too strong.

"In developing the convenience sachets we've worked hard to ensure that making an excellent cafetiere is possible time and again," says Nick Boxall, head of coffee quality at Lyons.

Of course, consumers sometimes want their daily hit of caffeine delivered as quickly as possible which is where instant coffee comes into its own. According to IRI, sales of instant have risen by 3.4%, while Kantar say that 83% of households have instant coffee in their cupboards.

Red Mountain coffee granules is one of the brands benefiting from the continued strength of the instant coffee sector. According to IRI the brand grew by 44% in 2009 and, with the relaunch of Red Mountain Gold, is looking to replicate the success in the freeze-dried market, which makes up more than half of the total instant coffee category.

Back in a 2008 report on the coffee market, Mintel noted that so far coffee brands had yet to capitalise on the healthy properties of coffee beans. This year Nescafé has stepped up to the plate with a £6m ad campaign to promote its new Green Blend product. The campaign aims to reconnect young consumers with coffee as a natural product and spread the word about Green Blend's antioxidant properties, which Nescafé claims can protect the body's cells from day-to-day damage.

Whether consumers take to the new blend or not, coffee drinkers still offer an opportunity for c-stores to boost spend in-store.

"The average coffee shopper spends twice as much per visit as the average convenience shopper," says Walker. "They are likely to buy milk, bread or chilled products, too. So the coffee category is important because it brings more items into the basket and more items through the till."

A cup above

Although coffee is making serious inroads into our national consciousness, tea is still the hot beverage that dominates life in the British Isles. According to the Tea Council we slurp our way through 165 million cups in the UK every day. Tea consumption seems to increase with age, which makes it a growing market, with consumers increasing their daily consumption by 25% between the ages of 20 and 40. Some 90% of households buy tea, 7% more than instant coffee.

So, it's no surprise that sales of tea have remained strong in convenience stores. According to AC Nielsen, the category has risen 5% in volume terms and 9.4% in value. In part, this is because tea is a 'recession-proof' product, since it's a staple shopping item that can cost less than 3p a cup.

"We have to start the day off with a cup of tea. It's just like bread and milk if we run out then we have to go out and get it. That's why the tea category plays into the hands of the convenience channel so well."

Though consumers can't seem to get by without a daily cuppa, they're quite a conservative lot when it comes to changing their preferred brand.

Mintel reports that own-label share of the market is only 17%, while the bulk of the action is divided between the big tea brands such as Tetley, PG Tips, Twinings, Typhoo and Yorkshire Tea.

Something different

Stocking big sellers such as the brands above is obviously important, but where can c-store managers source products that create a point of difference? Attfield believes that green tea might provide the answer.

"Green teas account for only a small percentage of sales in convenience," he says. "But with sales up 26% year on year there is a significant opportunity. Tetley Green Lemon 50s is the best-selling SKU, but so far has limited distribution in the convenience channel."

According to Mintel, traditional black tea may account for the bulk of sales. However, it is being outperformed by the new generation of herbal teas. This is because the core audience for herbal tea is evolving.

In the eyes of the marketers, herbal tea consumption used to be based around affluent metropolitan areas. Now, due to better communication of health benefits, herbal tea is spreading beyond the big cities and out into the general public at large.

"We've seen a real growth in herbal tea sales in the north and north-east," adds Attfield.

"It's a small market within the c-store sector, but it's growing. Green tea is linked to health and, just like gym memberships, we see a spike every January as people resolve to get healthier."

The market for Redbush teas in the convenience channel also represents an opportunity for growth among consumers who like their tea with added health benefits it's up 108.3% in volume and 72.4% in value.

Depending on the profile of your customers, keeping an eye on the herbal tea market can provide opportunities to cash in on healthy trends. For instance, boutique tea company Dragonfly Teas, which was the first company to bring Rooibos tea to the UK with its enduring Tick Tock brand, recently scored a hit with Pu'er tea.

Demand among health-conscious consumers also grew when the media revealed that celebrities were using it as a weight-loss aid.

As well as considering health issues, retailers need to be looking at those products which provide parents with convenience. Rosie Tapp of Bel UK says that busy parents mean busy convenience stores in the run up to the start of school.

As well as considering health issues, retailers need to be looking at those products which provide parents with convenience. Rosie Tapp of Bel UK says that busy parents mean busy convenience stores in the run up to the start of school.